Goodwill on consolidation

Goodwill on consolidation is the excess of consideration paid for a subsidiary over the fair value of its identifiable net assets at acquisition, recognised as an intangible; it is not amortised but tested for impairment annually.

ByHoang TruongUpdated July 3, 2026

FrameworkConsolidation

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A parent pays €12.0m for 80% of a subsidiary whose identifiable net assets are worth €9.0m at fair value. The proportionate method gives goodwill of €12.0m minus €9.0m, or €3.0m, covering only the parent's share. The full goodwill method adds the 20% non-controlling interest's fair value of €2.3m before subtracting net assets, giving €5.3m.

Where it fits

SubjectFinancial AccountingAdvancedTopicThe Financial StatementsAdvancedTopicAsset Measurement & ValuationAdvanced

The formula

LaTeX

\text{Goodwill} = \text{Consideration} - \text{FV of Identifiable Net Assets}

Variables

$C o n s i d er a t i o n$: Fair value of total purchase price paid — cash, shares, contingent consideration (€)
$F V o f I d e n t i f iab l e N e t A sse t s$: Fair value of the subsidiary's identifiable assets less its liabilities at acquisition date (€)

Proportionate share NCI method. A positive residual is recognised as goodwill — not amortised, but tested for impairment at least annually.

LaTeX

\text{Goodwill} = \text{Consideration} + \text{NCI}_{\text{FV}} - \text{FV of Identifiable Net Assets}

Variables

$C o n s i d er a t i o n$: Fair value of total purchase price paid (€)
$N C I_{F} V$: Non-controlling interest measured at fair value at acquisition (€)
$F V o f I d e n t i f iab l e N e t A sse t s$: Fair value of the subsidiary's identifiable net assets at acquisition date (€)

Full goodwill method; produces a higher goodwill figure that includes the NCI's share of goodwill, and a higher NCI balance on the balance sheet.